Apple Building First Data Center In China

Apple Inc. (NASDAQ:AAPL) is building its first data center in China to speed up services for local users and comply with the laws of the country. The company said in a statement, “The addition of this data center will allow us to improve the speed and reliability of our products and services while also complying with newly passed regulations.” The facility will be built and run in partnership with Chinese data management company Guizhou-Cloud Big Data Industry Co Ltd.

Tougher cyber-security laws were introduced in the country last month requiring foreign firms to store data within the country. Authorities say the law was drafted in reaction to the threat of cyber attacks and terrorism. Critics say that the law’s strict data surveillance and storage requirements are overly vague and threaten proprietary data.

Apple is the first foreign firm to announce changes to its data storage for China following the implementation of the new cyber-security laws. Chinese users’ information, now stored elsewhere, will be transferred to the new facility in coming months. The company claims there would be no back doors built inside its data center that would let the Chinese government access data. The company said in its statement, “Apple has strong data privacy and security protections in place and no backdoors will be created into any of our systems.”

The government of the southern province of Guizhou has been promoting the mountainous central province as the country’s data center capital. It hopes the high-tech facilities will bring white-collar jobs to the region. An Apple spokesman in Shanghai said that the data center is part of a $1 billion investment by the iPhone maker in the province. The new facility will be entirely driven by renewable energy.

The new China data center could also help Apple better compete with local rivals in the smartphone business. China is the tech giant’s second-largest market globally. However, Apple’s market share in the country has fallen as consumers wait for an updated iPhone 8 or switch to cheaper Android devices.

Amazon, IBM, and Microsoft also operate data centers in China, partnering with Chinese partners to run the facilities. Chinese cloud firms are also expanding rapidly in foreign markets. One of the largest, Alibaba Group Holding Ltd., now operates 17 data centers across China, the United States, Europe, Australia, Southeast Asia and the Middle East.

Working more closely with the Chinese government is an important step for Apple’s business in the country. The State Administration of Press, Publication, Radio, Film and Television shut down Apple’s iTunes Movies and iBooks service last year after less than seven months of operations.